Natural Gas Forecast: Volatility Highlighted as Prices Bounce Back after Plunge

Highlights

• Natural gas futures attempting to rebound after significant plunge.
• Decreased gas output and anticipated demand drive market sentiment.
• Texas power prices surge as heatwave boosts reliance on gas-fired plants.

Overview

U.S. natural gas futures are attempting to rebound on Wednesday, following a significant plunge in the previous session. Although the market had reached a three-month high just a day before, it seems to be holding steady with support from multiple factors. One of these factors is a decline in gas output, coupled with the anticipation of heightened demand fueled by hot weather conditions.

At 10:18 GMT, Natural Gas futures are trading $2.520, up 0.008 or +0.28%.

Gas Prices Retreat Amid Profit-Taking

In Texas, power prices have seen a surge due to the state’s anticipation of record-breaking air conditioning demand during the first heat wave of the summer. This increased demand is expected to heavily rely on gas-fired plants for electricity generation. Consequently, the recent surge in gas prices led to a one-year high in total futures volume, as speculators shifted their positions to a net long stance, anticipating further price increases.

Supply-Demand Dynamics Shape Gas Market

The interplay between supply and demand dynamics is significantly influencing market sentiment. Gas output in the U.S. Lower 48 states dropped from a monthly record in May to 101.6 billion cubic feet per day (bcfd) in June. Meteorologists forecast hotter weather from June 24 to July 5, raising gas demand expectations. U.S. exports to Mexico have increased, but gas flows to LNG export plants dropped due to maintenance, affecting output.

Natural Gas Futures Seek Rebound

In summary, U.S. natural gas futures are attempting to rebound today following a recent plunge, despite remaining near a three-month high. Market conditions are being supported by reduced gas output and the anticipation of increased demand driven by hot weather. While profit-taking and technical indicators contributed to the temporary price retreat, the stability of prices can be attributed to the reduction in gas flow to LNG export plants. Looking ahead, supply and demand dynamics, coupled with weather forecasts and maintenance schedules, will continue to shape market sentiment.

Short-term Forecast

Given the current rebound in prices and the supportive factors at play, the outlook for U.S. natural gas futures appears bullish in the near term once the market re-establishes support.

Technical Analysis

The Natural Gas market is currently showing a relatively neutral sentiment with a slight bullish bias. The current 4-hour price of 2.511 is slightly lower than the previous 4-hour close of 2.512. However, the price remains above both the 200-4H moving average (2.370) and the 50-4H moving average (2.442), indicating a potential bullish inclination. The 14-4H Relative Strength Index (RSI) sits at 46.66, reflecting a relatively balanced market condition. The main support area ranges from 2.224 to 2.188, while the main resistance area lies between 2.681 and 2.717. Overall, the market exhibits a neutral to slightly bullish outlook based on the provided indicators.